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A green push for measuring the economy

Measuring the gross domestic product (GDP) of a nation continues to be the main indicator of its economic strength. GDP refers to the market value of all final goods and services produced within a country during a given period of time; a country’s average standard of living would then be determined by calculating the GDP per capita.

But environmentalists are quick to point out that such a measurement does not provide a full picture, since it does not account for the environmental damages or losses resulting from the production of goods and services.

Consequently a “Green GDP” would be necessary to factor in environmental costs – such as pollution and depletion of natural resources to name a few – into measurements of economic progress.

But seldom do countries calculate a Green GDP, the obstacles to a calculation being both political and numerical in nature. On the political front there is still an obsession to use GDP figures, since governments seek to portray a constant growth scenario. Inclusion of environmental damage stands to jeopardize this image.

Numerically, calculating a Green GDP often requires officials to compile extra data, often complicated in nature, which is consequently met with resistance.

With the intent to circumvent these obstacles, prominent Chinese economist Niu Wenyuan introduced earlier this month what he terms to be the “GDP quality index,” which serves to measure the economy not just by size, but by sustainability, social equality and ecological impact.

Speaking to the Guardian newspaper, Wenyuan explained, “We shouldn’t worship GDP and we shouldn’t abandon GDP. Our aim is to have a GDP that consumes fewer natural resources, is less harmful to the environment and has a low social management cost. We want rational, genuine GDP.”

Overcoming the GDP obsession

Wenyuan’s formulation combines the following five elements: first is an economic quality, which is measured using the amount of resources and energy needed to generate 10,000 yuan (approximately US$1500) of GDP.

Then there is a social quality, which includes differences of incomes between rich and poor; third, an environmental quality, which assesses the amount of waste and carbon generated per 10,000 yuan of economic activity; quality of life, which figures in life expectancy and other human development indicators; and finally, a management quality, which includes measures such as the durability of infrastructure.

Though it may sound complex, compared to the ill-fated Green GDP, the quality index is simpler to understand and calculate because it is based on existing government statistics. Yet it still stands to be perfected, as it over-emphasizes production over consumption.

The GDP quality index stands as one of several proposals worldwide using economic theory to reverse environmental degradation and eancourage sustainable principles. Using measurements such as these serves to portray an accurate picture of a country’s economic standing and thus serve as a political means to apply pressure on governments to veer toward a green economic agenda.

A green economic agenda would entail in the long-run instituting a green economy. According to the United Nations Environment Programme (UNEP), a green economy is defined as one whose growth in income and employment is driven by public and private investments that serve to reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services. Such investments would need to be catalyzed and supported through targeted public expenditure, policy reforms and regulation changes.

Greening Egypt one number at a time

Like many other countries, Egypt has not sought to calculate its Green GDP. According to Hala Abu Ali, assistant professor at the faculty of economics and political science at Cairo University and research associate at the Economic Research Forum, Egypt is a textbook example of a country still obsessed with GDP growth figures.

Abu Ali explains, “Weighing and measuring Egypt’s environmental losses – and accordingly responding with the required environmental measures – remains at the bottom of the government’s priority list. We are still locked into a vicious cycle whereby economic growth is prioritized over environmental protection, even if environmental problems stand to obstruct the potential to grow economically.”

According to Abu Ali, the government remains oblivious to the idea of translating environmental damage or losses into numbers and in turn uses that to guide its economic policy.

This lack of awareness is also highlighted by Tarek Selim, an associate professor of economics at the American University in Cairo. Selim goes on to point out that no environmental issue can be addressed in full so long as economic externalities remain unaccounted for.

Both agree that using calculations such as the GDP quality index can help further an environmental agenda. Rather than wait for the government to take the initiative in calculating greener indexes, researchers and academics can use their findings as a tool to pressure the government to integrate environmental efforts in all government-related policies.

Needless to say, there is a pressing need to move ahead with a stronger environmental agenda in Egypt, one that will not be at odds with economic policies. With this in mind, the pressure should be on to transition Egypt to a green economy.

“I am quite worried, to be honest,” says Abu Ali. “Our continuous stagnation has led to us missing out on several important economic transitions throughout history. We missed the agricultural and industrial revolutions and I am not sure where we will be if we miss out on the coming green revolution as well.”